Living Here, August 3, 2016

LIVING HERE

What is the Premier Resort Area Tax (PRAT) or what the Geneva Shore Report chooses to call the Resort Area Tax (RAT)?
It is the only “city sales tax” that is permitted in the State of Wisconsin. It’s technically a tax on business in the resort’s area; however, the businesses taxed can (and virtually always do) pass the tax on to the customer. With only a very few exceptions, if the RAT is approved, any place within the Premier Resort Area that has a sales tax, will also have the RAT tax added to it. It would be a half percent sales tax, which increases the cost of a $100 purchase by an additional 50 cents. Once approved, though, it may be possible for it to be increased another half percent, or more, without a referendum (if and only if it is included within the state’s approval, and does not require an amendment to state’s statutes).

The purpose or justification of the tax is to enable a resort area to charge tourists to help pay for the area’s infrastructure that they use while visiting the area. The tax in not just on tourists, but includes residents and any non-resident who spends money in the Lake Geneva area. The Resort Area Tax (RAT) is obviously beneficial to city administrators because it increases the city’s revenue, but it can also be viewed as beneficial to the residents of Lake Geneva because a portion of the tax would be paid for by tourists and visitors who spend money in the city. Accurate estimates of what percentage of the RAT that would be paid for by tourists versus visitors versus residents are not available.

The estimates presented by Mayor Blaine Oborn, and then by Alderman Bob Kordus, at the July 25th council meeting were significantly different. They varied from about 25% of the tax to be paid by residents and 75% to be paid by others, or the other way around. In estimating who pays what, there are three groups: residents, tourists, and visitors or workers who are local non- Lake Geneva residents, but who shop in the City of Lake Geneva. Using parking revenue data as a guide, and making reasonable assumptions on the difference in per day taxable spending of the various categories and calculating the total resident days, tourist days and visitor days the best SWAG estimate is that approximately one third of the tax would be paid by residents, one third paid by tourists, and the last one third to be paid by visitors with about +/-10% for each category. Is the Resort Area Tax a good deal? The revenue from RAT could only be used for infrastructure; so as a user fee (in theory) it makes sense, and is in line with a gasoline tax that is to be used to pay for roads, and a tax on airports that is to be used to pay for air traffic controllers. In reality, however, all taxes are usually thrown together and there are at least four major problems with the RAT.

First: Unless the city shows better financial prudence, accountability and spending restraint than it has in the past 10 years, approving the RAT is likely to condone the city’s financial irresponsibility. The city’s past financial irresponsibility includes the co-mingling of city funds which hides financial tracking; the questionable use of TIF funds, and the neglecting of critical infrastructures (roads and equipment) for years, so that money can be spent elsewhere, and then justifying borrowing to cover the infrastructure that was neglected.

Second: Forcing non-residents who regularly shop at Lake Geneva businesses to support Lake Geneva by paying the tax could harm the city’s relations with the surrounding communities, just as the city’s TIF tax did (that they also had to pay.

Third: The true restraint on city government should be by the people and higher levels of government, but since the Mayor Chesen debacle (Hummel & Geneva Ridge law suits) the majority of citizens, the county, and the state don’t want to get involved in the City of Lake Geneva politics.

Fourth: The Resort Area Tax requires that forty percent of the income, or more, be dependent on tourists. The original law was intended to help a small town with few local residents defer some of the costs to build and maintain a costlier infrastructure than the town, without the tourists, would need. To get the RAT Lake Geneva would require a special exemption because its twenty-three percent is well below the required forty percent, and with the expected expansion of housing and commercial developments that percentage will probably cause that percentage differential to increase.

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